alt Hacker NewsWealth taxes don't work because wealth gets extremely fuzzy.
For example, unsold stock that I bought 15 years ago; and then got a loan against. I'm wealthy... kinda? But I didn't sell the stock; I have unrealized gains, and you shouldn't tax me beyond income tax on borrowed money? Okay, tax me on my unrealized gains then - but then 2008 repeats itself, stock goes down 40%, do I get a refund? Of course not, I only pay when stock goes up and never down, which is not exactly a fair incentive.
Now imagine artwork I bought 15 years ago from Banksy. Or imagine my video game collection I bought on eBay that contains some rare titles. Or what about my wine collection? Now imagine I'm Elon Musk, on paper worth $400B, but if I sold even 20% of my stock, that paper valuation would be shredded from an excess of liquidity driving the share price down, so you can't tax me on what is physically impossible to realize.
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> paper valuation
Don't allow loans against equity ownership. If you can take a loan against it, you should be taxed on it.
> artwork, rare collection
Tax the insured value. If it can be insured for 100 bucks, it should be taxed on 100 bucks.
What about a law where you couldnt use over a million dollars (to exclude normal people) a year of any asset as collateral for a loan unless you paid capital gains on it at its current valuation?
> Okay, tax me on my unrealized gains then - but then 2008 repeats itself, stock goes down 40%, do I get a refund? Of course not, I only pay when stock goes up and never down, which is not exactly a fair incentive.
We already do this for property taxes.
If the tax is set at say 2% of wealth (excluding primary home and _displayed_ artwork/collectibles), and that's above your income, just pay with your stocks at the valuation they have at tax day.
Why do you assume such a law would not allow counterbalancing capital losses?
I don't have an economics or finance background. But why could there not be a taxable event for the loan amount when it is made? Sure, maybe it gets taxed at a lower rate than even capital gains to continue incentivizing leveraged investments of this nature. Is there some economic argument for why lenders can realize the value of an asset when loaning out money against it but the tax man can't touch that asset until it's actually sold?